Organic growth Featured

7:00pm EDT February 6, 2006
When Kenexa recently acquired two companies, Rudy Karsan was prepared.

The chairman and CEO — whose company helps other companies attract and retain talent — knew what to do to blend the cultures and make employees feel comfortable. And the key to that was constant communication.

“When you think about communication, most people usually think about, ‘What am I going say?’ rather than, ‘What is going to be heard?’ The nuance, while slight, is fairly important,” he says.

Kenexa employs more than 700 workers, and revenue has grown from around $65 million in 2005 to an estimated $95 million for 2006.

Smart Business spoke with Karsan about how he managed Kenexa’s January acquisition of Massachusetts-based Webhire Inc. and the challenges he had to overcome.

How do you manage a successful acquisition?
We tend to get everything done up front to the greatest extent possible, so not only do we do the due diligence, but we have an integration plan that’s laid out where the executives of both the companies meet to identify what the new Kenexa would look like.

We also work on bringing about whatever change is necessary as quickly as possible and remove as much uncertainty in the eyes of the employees to the greatest extent possible. We communicate, communicate, communicate, and then communicate some more.

The date of (the Webhire acquisition) announcement, I was in Lexington, Mass., for two days. (Throughout January,) we had at least two or three executives there, constantly communicating.

Any time you have an acquisition, people wonder what’s going to happen to their job: Are you going to keep the space? Customers wonder whether you’re going to continue supporting that particular version of the particular software: Are you going to continue to expand on it? Is your protocol going to be any different? Is your value proposition going to change?

These are the kinds of things that are in the hearts and minds of our customers and our clients, so we work very hard at communicating to give the message out there.

How did you decide to acquire Webhire?
The space we’re in — human capital management — is a fairly fragmented space that has a lot of specialties and sub-specialties. Strategically, our organic growth over the last couple of years has been around 40 percent. We were looking for a way to accelerate the organic growth.

We had broken up the acquisition strategy into three main components. The first one is geographical expansion, which would include globalization. Hence, the (Canadian-based) Scottworks acquisition [in August 2005.]

The second one is vertical expansion, entering into industries that we are currently not serving in either a big way or in a significant manner. An example would be the Webhire transaction; their applicant tracking system is serviced heavily in the health care and not-for-profit market in which we are not very strong.

The third is to buy solutions. If there are organizations we could purchase that could add to our suite of solutions — both products and services — we would be very interested in that. Webhire was a very appealing acquisition for us because they have a product called Onboarding, which is a product we were looking to build from scratch, and now with the Webhire transaction, we will not have those issues.

How does that acquisition to benefit your company?
No. 1, it gives us the new Onboarding product. Two, it gives us an entry point in (the health care and not-for-profit markets.)

Three, it’s a financially accretive transaction for Kenexa — our earnings per share goes up. Our EPS to the street for 2006 is 85 to 90 cents. Our guidance to the street in 2005 was somewhere in the 50-cent range.

The fourth thing is we get very solid domain knowledge from a group of very talented employees who are sitting there right now. A lot of them are considered to be thought leaders in the space so we’re very excited about that. The human resources knowledge and expertise on applicant tracking systems is very strong within Webhire.

The fifth reason is that as Kenexa continues to grow, we’re looking to service a market which has fewer employees than our traditional sweet spot, which is in the 5,000- to 30,000-employee marketplace. It allows us to expand into that area.

Last but not the least, we have opportunities to cross-sell so we are getting over 200 active clients with this transaction we can approach and make the company better for our clients and have the ability for them to use our solutions to further enhance their work force.

HOW TO REACH: Kenexa, (610) 971-9171 or www.kenexa.com